Place of Supply for OIDAR

In this article, we will understand about the OIDAR service and place of supply for OIDAR in detail.

Budget 2023 update (to be notified): 
(1) The words ‘essentially automated involving minimal human intervention and’ has been removed from the definition of OIDAR services.
(2) Now, ‘non-taxable online recipient’ means an unregistered person receiving OIDAR services located in the taxable territory. Also, the unregistered person includes the TDS deductors registered u/s 51 of the CGST Act.

What is an OIDAR service exactly?

Both the following conditions must be satisfied to be a OIDAR service. If one is not satisfied, the service is not OIDAR.

• Delivery is mediated through internet.
• The supply is impossible without information technology. (Budget 2023 removed the words ‘essentially automated involving minimal human intervention and’. However, CBIC yet to notify this change)

Examples of OIDAR services:

• Advertising on internet
• Providing cloud services (Google Drive)
• Provision of e-books, movie, music, software and other intangibles via internet (Hotstar, Amazon Prime Video)
• Providing data or information, retrievable or otherwise, to any person, in electronic form through a computer network;
• Online gaming (Steam)

It has also been clarified that using the internet to communicate or facilitate service does not always mean that a business is providing OIDAR services.

Non-OIDAR services

• Supplies of goods, where the order and processing is done electronically
• Supplies of physical books, newsletters, newspapers or journals
• Services of lawyers and financial consultants who advise clients through email
• Booking services or tickets to entertainment events, hotel accommodation or car hire
• Educational or professional courses, where the content is delivered by a teacher over the internet
• Offline physical repair services of computer equipment
• Advertising services in newspapers, on posters and on television

Applicability of GST for OIDAR Services

Who will register and pay GST for OIDAR services when the service provider is located outside India?

In respect of import of online information and database access or retrieval services (OIDAR) by non-taxable recipients*, the supplier located outside India will be responsible for payment of taxes. The service provider (or intermediary as the case may be) will be required to take a single registration for paying IGST under the Simplified Registration Scheme to be notified by the Government.   Either he will have to take registration or he will have to appoint a person in India to pay GST. Read here for registration process of OIDAR.

*Budget 2023 changed the meaning of ‘non-taxable online recipient’. Now, it means an unregistered person receiving OIDAR services located in the taxable territory. Also, the unregistered person includes the TDS deductors registered u/s 51 of the CGST Act. These changes are yet to be notified by CBIC.

Does reverse charge apply in OIDAR services?

The person receiving any such services i.e. OIDAR should pay the IGST to the government only if he is registered under GST as a taxable person.

Why does OIDAR service require a treatment different from other services?

The peculiarity of OIDAR service is that it can be provided online from a remote location outside India.

• If a similar service is provided by an Indian Service Provider, from India to recipients in India then such service would be taxable.
• If such services are received by a registered entity in India then GST will be payable under reverse charge.

This gives the overseas suppliers of such services an unfair tax advantage if their services are left out of the tax net. Again, as the service provider is located overseas and might not have a presence in India, the compliance becomes difficult. So, the government has  a simplified scheme of registration for such service providers located outside India.  

Place of supply for OIDAR

What is the place of supply for OIDAR?

How to determine the location of the recipient?

For this service, the recipient will be deemed to be located in the taxable territory (i.e., in India) if any two of the following conditions are satisfied-  

1. Location of address presented by the recipient through internet is in India
2. Credit card or debit card (or any other card such as store value card) which the recipient uses to pay is issued in India
3. Billing address of the recipient of services is in India
4. IP address of the device used by the recipient is in India
5. Bank of the recipient’s account used for payment is maintained is in India
6. Country code of the subscriber identity module card used by the recipient of services is of India
7. Location of the fixed land line through which the service is received by the recipient is in India.

  The government can notify any service or circumstances in which the place of supply shall be the place of effective use and enjoyment of a service. This will be done in order

• prevent double taxation
• prevent non-taxation of the supply of a service
• for the uniform application of rules

Special provision in case of a service provider outside India and a non-tax-payer in India

This situation is quite common in India. For example, a student in India registers in Netflix (US) for watching movies. Netflix becomes liable to register in India and pay IGST.

*Budget 2023 changed the meaning of ‘non-taxable online recipient’. Now, it means an unregistered person receiving OIDAR services located in the taxable territory. Also, the unregistered person includes the TDS deductors registered u/s 51 of the CGST Act. These changes are yet to be notified by CBIC.

What happens where the OIDAR service provider supplies services through an intermediary?

If an intermediary located in outside India, arranges or facilitates the supply of OIDAR services, from the service provider to the non-taxable online recipient. then the intermediary will be deemed to be the recipient of such services.   But if the intermediary satisfies the following conditions then it will not be considered as a recipient– 
(a) The invoice issued by the intermediary clearly identifies the service and its supplier in non-taxable territory 
(b) The intermediary neither collects or processes payment in any manner nor is responsible for the payment between the non-taxable online recipient and the supplier of such services 
(c) The intermediary does not authorise delivery 
(d) The general terms and conditions of the supply are set by the service provider and not by the intermediary

How our software can help you?

ClearTax GST Software will make your life much easier. For your sales invoices, you do not have to calculate the place of supply each and every time. All you need to do you see enter the details of your buyer in the contacts master. You can use ClearTax Bill Book to generate sales invoices. Based on you buyer’s and your GSTIN the software will automatically calculate the place of supply according to the provisions and inform you whether you will charge CGST/SGST or IGST. For your purchases invoices, all you need to do is upload the excel copy of your purchase invoices. The software will do the rest. We have an entire series of articles on place of supply-

• Place of supply of goods
• Place of supply of general services
• Place of supply for specific services
• Place of services related to immovable property
• Place of supply for transportation services
• Place of supply for telecommunication services
• Place of supply for banking services

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